How To Simplify Your Finances with Online Budgeting Software and Why It Works

Simplicity is a proven principal in life. Every successful and long lasting business I know of has incorporated simplicity into their business. No one wants to deal with things if they are complicated and they would rather spend their time looking for a simpler solution to their problem than figuring out a complex one.

Let me give you an example. I’m sure you have all heard of the Weight Watchers diet program and know of it’s success. The program essentially dumbs down the task of counting calories to a very simple science. It’s an easier way to lose weight on a budget.

In the Weight Watchers program, you are given an individualized POINTS budget. You can eat anything you want as long as you stay under your budget, but the program promotes eating the foods that give you the most food for your POINTS. This in turn promotes healthy eating and is very easy to follow. If you stay below your POINTS budget, you will lose weight. That’s all fine and dandy but why has Weight Watchers been so successful?

It’s because you no longer have to track all of your calories or different types of foods and ingredients within them like fat percentage, sodium content, carbohydrates and sugars. You no longer have to bring a calculator and portion scale to the dinner table. The program is simple and effective, which makes people want to use it. It takes so little effort to follow the plan and lose weight. This is why Weight Watchers is so successful.

How can we apply that same simplicity to our financial lives?

Finances are full of complex formulas, theory, prospectus and way too much math. Managing all that is just like having to track all of the ingredients in the food you eat. Even if you want to get your finances in order, tracking everything takes a lot of effort and that’s why you fail.

We need a way to take all the calorie counting out of calorie counting in our finances, like Weight Watchers did for dieters. If things are simple and effortless, that will ensure our success.

Here are some ways to simplify the task:

1. Stop worrying about all of your accounts

This may seem like it’s counter-intuitive – how could neglecting your accounts make things easier? Well, doing nothing is certainly less complicated, but that’s not what I’m suggesting here 🙂

Instead of doing things manually, which takes effort and time, sign up for an online accounting service such as Mint.com that can aggregate all of your bank accounts for you into one easy manageable account. This relieves you from the task of checking all your accounts and makes checking your balances quick and simple.

On top of just being able to view all of your account balances in one place, Mint has tons of tools to help you improve your financial management, reach goals and save money. Similar budgeting tools that you may like include Quicken, You Need a Budget, and Debt Goal.

Simple means you will actually do it and that will help your financial situation greatly.

2. Using the cash envelope system to manage your budget

With Weight Watchers, the POINTS system is used to control calorie intake in a very simple manner. Using the cash envelope system can perform something similar for your finances.

Splitting all of your monthly income into envelopes for bills and spending and refusing to use credit cards, or better yet putting them on ice, can simplify how you budget and will control spending.

Once the money in the envelopes is gone, you can’t spend anymore that month. It can’t get much simpler than that. If you’d like to try out an online budgeting tool that utilizes this method, try out Mvelopes.

3. Automate your savings to accumulate wealth effortlessly

Saving money takes effort and constant focus. If you happen to forget to move money from your checking into your savings, the probability that that money will get spent is high.

Instead, put your savings plan on autopilot so you can forget all about having to manually move money between accounts. The bank will do it all for you on a schedule and before you know it, your savings account will be bursting at the seams.

Not only will this alleviate the headache of having to login to your bank’s website to move the money when you get paid, automatically keeping your savings goals on track, but it will also create an artificial void of spending money in your account. One bank that I recommend because of this very feature is ING Direct.

Even though you know you actually have the money in savings, seeing a low balance in your account will help curb your need to spend and remind you of your goals.

Finances don’t have to be as complicated as they seem and by simplifying any part of them that you can, you will insure your success. It’s easy to maintain something when it’s easy!

Jesse Michelsen is a freelance personal finance writer and the founder of Personal Finance Firewall. There he writes about getting the most out of your dollar by using simple and effective strategies.

6 responses

Charles October 6, 2010

I like to keep and maintain my own personal budget with Excel. I like to keep track of exactly when each bill is paid and where its going. I like to enter my expenses manually so I can have a better sense of having control of my own money. But other online software that link multiple accounts together can be helpful too, especially if you have many bills to pay.

I do too. I have my little excel spreadsheet I update each month. I’ve used Mint in the past, and I really liked it, but it tracks to a level of detail that I don’t need anymore. Even as a geeky number/graph lover I never got into Mint. (Though I might try it again!)

Great post! I’ve actually got a system just as you describe. I used to use excel (it didn’t work for me because personal use of excel was not a regular part of my day) but now I have all my accounts tracked together in one online service, for certain things that I know will be cash purchasing (fuel and groceries) I use an envelope system to track spending and keep receipts, and my savings are automated to the point that I barely think about them. I find that it frees up a significant amount of brainspace to create more of a bottom line when you aren’t constantly thinking about it.

I need to go ahead and set up an automated transfer system from my checking to my savings because you are right–money is easy to spend it when it’s sitting in the checking account. I also visited mint.com and it looks good. I’m going to give it a try. Thank you.

I have been maintaining my financial life in order with Quicken for years. I love being able to keep track of how much I spend across multiple accounts, as well as being able to quickly follow all my investment positions.

I have a lot of accounts (I’m always looking for the best deal/rate/fee/etc), and so having them in one place that updates automatically is a must!